Hardest hit was London, where prices fell at the fastest pace in nearly a decade. The Southeast similarly saw slides in home prices. But the ripple effect has yet to reach northern regions, Wales, and the East Midlands, which all recorded firm price increases.

RICS members reported that an increasing number of potential homebuyers have decided to take a wait-and-see approach for the time being. However, conditions remain ripe for some rebound in the market, with interest rates and unemployment remaining low.

RICS housing spokesman, Ian Perry, said: "The faltering housing market has come in response to the growing fears about the situation in Iraq and the direction of the UK economy. This latest survey shows that one of the last bastions of economic endurance is simply no longer able to sustain its unprecedented growth in the face of a looming war and the economic uncertainty it has brought about. While the fall in home prices certainly represents a setback for the market, there is no indication at the moment that the downturn will be long lasting.

"We believe that there is potential for the housing market to swiftly rebound, if the political and economic situation shows signs of stabilising soon."